Behavioral biases and the representative agent |
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| Authors: | Elyès Jouini Clotilde Napp |
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| Institution: | 1. CEREMADE, Universit?? Paris Dauphine, Place du Mar??chal de Lattre de Tassigny, 75 775, Paris cedex 16, France
2. CRNRS-DRM and Universit?? Paris Dauphine, Place du Mar??chal de Lattre de Tassigny, 75 775, Paris cedex 16, France
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| Abstract: | In this article, we show that behavioral features can be obtained at a group level even if they do not appear at the individual level. Starting from a standard model of Pareto optimal allocations, with expected utility maximizers but allowing for heterogeneity among individual beliefs, we show in particular that the representative agent has an inverse S-shaped probability distortion function as in Cumulative prospect theory. |
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